Austrian provinces take up minimum income scheme

A new means-tested minimum income scheme was implemented in three Austrian provinces in September 2010. The other six provinces were expected to introduce the scheme, which replaces the social assistance scheme, over the last quarter of 2010. Everyone with a legal claim to unemployment benefit, unemployment assistance, social assistance and pensions, and whose income is below a specified income support threshold, will receive the means-tested minimum income of €744 a month.

Background

In spring 2008, the then Federal Minister of Social Affairs and Consumer Protection, Erwin Buchinger, agreed with representatives of all nine Austrian provinces (Länder) on the introduction of a means-tested minimum income scheme (Bedarfsorientierte Mindestsicherung) by the summer of 2009, replacing the former provincial social assistance schemes (Sozialhilfe). The aim of the new scheme was to set national minimum standards of assistance in order to prevent poverty. Under the former social assistance scheme, there was great variation between the provinces (for example, regarding eligibility criteria, stipulations on whether the benefit had to be repaid, or the amount of benefits). The means-tested minimum income scheme was finally implemented (AT0910019I) on 1 September 2010 in three out of the nine Austrian provinces (Vienna, Lower Austria and Salzburg). The other six were expected to follow suit by 1 January 2011 at the latest.

Eligibility requirements

In order to qualify for the benefits, a claimant needs to:

• be in need of financial assistance;

• be a permanent resident of Austria;

• have no more than €3,720 of savings (home and contents are exempt from this calculation, but a car can be kept only if it is needed for employment or care activities, or because of a disability);

• be ready to take up work.

Pensioners, those caring for children under three years of age, for family members or severely ill children are exempt from this last criteria as are young persons in education or training which began before they reached age 18 (except for university students).

Improvements of new scheme

Unlike the old social assistance scheme, beneficiaries will no longer be forced to pay back benefits later, when they have found employment and are better off. This condition meant that about 50% of all potential beneficiaries did not apply for social assistance. Parents and children of beneficiaries are also no longer liable for the debt either. A ‘ban on impairment’ under the new rules also means that no claimant gets less money than he or she did under the former scheme.

The payment, a flat rate, consists of a basic benefit (75% of the total) and living assistance (25% ) Single people and lone parents get €744 (net) per month, with couples receiving €1,116. An extra €134 is paid for every dependent child, which reduces to €112 from the fourth child onwards. For those living in privately owned housing or with family members, and not paying rent, the living assistance element (€186 for single people and €279 for couples) is withheld; and they get just the basic benefit of €558. The provinces cannot pay less than these amounts (which are re-assessed annually) but they can choose to pay more, or give additional benefits. The province of Upper Austria, for example, plans to pay the minimum income 13 times a year instead of 12 as set down as minimum standard, and the province of Vienna plans to increase the amount paid per child to €200. The means-tested income needs to be applied for either at the district or communal level or at the Public Employment Service (AMS), thus emphasising the link to active labour market policy. If jobs or courses offered by the AMS are not taken up, claimants face cuts or even cancellation of the minimum income. One important innovation is that recipients get a regular health insurance ‘e-card’ like the rest of the population, and not a socially stigmatising social assistance health insurance voucher.

Reactions

The link to active labour market policy is generally welcomed by both organised business and labour. The Federal Economic Chamber (WKÖ) by and large supports the new scheme. However, its representatives insist on linking payments to the obligation to take up employment, and suggest claimants should be forced to do voluntary work in the community, similar to the German model of ‘citizen’s work’ (Bürgerarbeit). This idea is also backed by Christine Marek, leader of the Vienna branch of the Austrian People’s Party’s (ÖVP). Ms Marek suggested that beneficiaries who have been unemployed for more than six months should be obliged to take up charitable work – such as municipal work like sweeping streets or mowing lawns, or working for non-governmental organisations (NGOs). However, opposition parties and labour experts attacked this idea, saying that this would only lead to wage dumping. WKÖ is happy that the minimum income will be paid only 12 times a year, instead of 14, as was originally planned (analogous to the extra monthly payments that are laid down in almost all collective agreements). Otherwise, according to WKÖ, the difference between benefits and incomes in low-wage sectors would be too small, thus decreasing the incentive to work.

The Austrian Trade Union Federation (ÖGB) says the scheme is an important step towards reducing poverty, and it also praises the increased importance of labour market activation. It is disappointed at the rejection of the two extra monthly payments. The Austrian Network Against Poverty and Social Exclusion (Armutskonferenz), a network of welfare organisations, social initiatives, church organisations and NGOs, has also criticised the fact that there will only be 12 instead of 14 monthly payments and considers the new scheme merely a reform of the old social assistance scheme with some elements of a minimum income. Furthermore, it criticises the fact that provincial regulations could not be harmonised and fears that some groups of people in specific provinces might be worse off because the promised ‘ban on impairment’ is not to be found in provincial laws. On the other hand, the Armutskonferenz appreciates the abolition of the repayment liability and the changes in the health insurance scheme.

Commentary

The main objective of a nationally standardised and uniform social assistance scheme has not been achieved with this minimum income scheme. There are big differences between the provinces in terms of implementation and voluntary allowances. The motivation to take on work has been increased firstly because the income is to be picked up at the AMS and secondly as only 85% of an employment income is calculated towards the minimum income. Formerly, the total employment income was calculated towards social assistance benefits, meaning that, for example, a person earning a monthly income of up to €366 (which currently marks the threshold where employees are exempted from compulsory health and pension insurance) would receive social assistance benefits reduced by that amount. This in turn meant that the beneficiary would receive, in total, the same amount as a person not working at all, making the incentive to take up employment minimal.

Bernadette Allinger, Working Life Research Centre (FORBA)